Public and private sector auditors and accruals quality in English NHS hospital Trusts

Ballantine, Joan, Forker, John and Greenwood, Margaret (2008) Public and private sector auditors and accruals quality in English NHS hospital Trusts. The British Accounting Review, 40 (1). pp. 28-47. ISSN 0890-8389

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To promote auditor independence and audit quality in English NHS Trusts the Audit Commission regulates auditor rotation, fees and the appointment of its own and private sector auditors. NHS sanctioned departures from GAAP, some of which allow the financial breakeven target to be achieved, have been criticised by the Audit Commission as detrimental to financial discipline. In this paper, we investigate the association between abnormal accruals and the achievement of financial breakeven in NHS hospital Trusts over the period 1998–2005. We also investigate the association between abnormal accruals, audit fees and the Trusts audited by public and private sector auditors. We find evidence that abnormal accruals are used to achieve financial breakeven and they differ across different types of auditor. We also identify a negative relationship between abnormal accruals and NHS Trust star ratings. These findings raise questions about the ‘quality’ of NHS audit where compliance with NHS-specific regulations overrides the wider GAAP-based requirement for financial statements to show a true and fair view and they warrant reconsideration of the nature of audit in NHS Trusts.

Item Type: Article
Keywords: Audit quality; Abnormal accruals; NHS Trust
Schools and Departments: University of Sussex Business School > Business and Management
Subjects: R Medicine > R Medicine (General) > R728 Practice of medicine. Medical practice economics
Depositing User: Catrina Hey
Date Deposited: 21 Jan 2013 15:09
Last Modified: 25 Oct 2019 07:22
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